NewSat pain continues

Newsat (NWT)

Struggling satellite broadband and communication services company
NewSat
posted its first profit in at least 10 years yesterday, which sent the stock to the top of its six-month trading band of 0.3¢ and 0.5¢.

The company posted a 26 per cent jump in revenue to $25 million and a net profit of $26,000 for the year ended June 30, 2010, compared with a loss of $3 million the previous year, as it finally showed some concrete results after reinventing itself from a dotcom business.

The mood at its annual meeting this year could be less sombre than in the past few years – particularly in 2005, when angry retail investors candidly expressed what they thought of management after watching the stock collapse from about 80¢ in 1999 to just 2¢ that year.

Unfortunately for long-suffering investors, the profit result won’t ease the pain much as the stock was trading at 0.5¢ in early trade, which has been the resistance level since early February.

On the upside, NewSat appears to be building a more stable customer base with low levels of contract churn. More than 90 per cent of its contracts are from existing clients and monthly recurring revenue is now topping $2 million.

Its customers come mainly from the oil, mining, gas and military industries and the company has noted good demand growth, but management declined to give guidance for the current financial year.

Boom Logistics (BOL)

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On the other hand, it seems that crane and lifting equipment company
Boom Logistics
can do no wrong, even though its profit results on Wednesday missed market expectations.

While the stock dipped on the news, it surged 11.5 per cent on Friday and a further 2.3 per cent in early trade yesterday to 44.5¢ – making this the best two-session gain since mid-June.

Boom turned in a 66 per cent plunge in operating net income to $4.1 million and an 18 per cent drop in sales to $325.6 million for 2009-10 last Wednesday as construction and mining activity hit a wall during the economic turmoil. In contrast, consensus forecast was looking for a net profit of $4.3 million and revenue of $363.3 million.

But the news has done little to dent confidence in its outlook, with the market believing that Boom will deliver a near fourfold increase in net profit for the financial year ending June 30, 2011.

Royal Bank of Scotland is one such supporter.

It thinks Boom will have little trouble meeting expectations, given a strong pick-up in profitability in the last quarter of 2009-10, as utilisation rates for the highly leveraged crane wet hire business shot up to 81 per cent.

It also noted favourable conditions for Boom’s key operating markets, particularly resources, and the prospect that Boom can charge more for its equipment as markets continue to tighten.

If any doubts exist that management can meet expectations, there is always the prospect of a takeover, as a few parties have expressed interest in buying the debt-laden company.

Archer Capital’s 52¢ a share proposal is the latest, but management has rejected the offer as it thinks it undervalues the company, which is on a net tangible asset (NTA) value of 53¢ a share.

RBS has set its price target to match Boom’s NTA and is urging investors to buy the stock.

Austin Engineering (ANG)

Austin Engineering
has experienced some profit taking after reporting weaker revenue that missed expectations, although net profit hit a record for the fifth year running on Monday.